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Ch 10 SPENDING
Transcript of Ch 10 SPENDING
Until 1940, public sector (government) spending was relatively low.
Only spent on national defense and other necessities.
Post WWII-Post Depression
-government became much more involved--big increases in spending
Minimum wage, social security, welfare, education, new methods of transportation, Cold War, etc.
ALL NEW EXPENSES AFTER THE 30's-40's
THE FEDERAL BUDGET
Developed by the
President and his OMB (Office of Management and the Budget)
The budget must pass the House and the Senate,
in that order, separately.
Each may edit the budget proposed by the President
Once through both houses, the “new” budget is sent back to the president.
He can sign it into law or
On RARE occasions, the president is given the power of
LINE ITEM VETO
Watch the first 3 minutes and answer the questions on the handout with your teacher.
OTHER TYPES OF SPENDING
The public sector (gov't) makes much of its purchases from the private sector.
The GOVERNMENT actually receives something in return for its money.
Ex. Paying Boeing for a drone, paying the CDC for supplies of Flu Vaccine, etc.
The GOVERNMENT does NOT receive anything tangible for its spending.
Ex. Paying the CDC for medical research, money spent on
Transfer payments between levels of government are called
GRANTS IN AID
PURCHASE OR TRANSFER PAYMENT?
MISSLE DEFENSE SYSTEM
SUPPLIES OF H1N1 VACCINE
When we run a deficit, we must make up the difference
Government borrowing (Selling Bonds) can actually drive interest rates up for all of us—the
CROWDING OUT EFFECT
Increased government borrowing drives interest rates up for ALL BORROWERS
This "CROWDS OUT" some potential borrowers--they can't afford the rate.
Watch the first 6 minutes!
This can be done by selling bonds to individuals or
BONDS MUST BE PAID BACK PLUS INTEREST